Juniper Secures $175M Settlement from Palo Alto Networks

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May 2014

Irell & Manella client Juniper Networks Inc. secured its latest victory this week, when Palo Alto Networks Inc. agreed to pay $175 million to resolve the patent litigation between the two network security companies pending in California and Delaware.  

The complex bicoastal litigation began in December 2011 when Juniper Networks filed a lawsuit in the District of Delaware alleging that Palo Alto Networks products infringed a number of Juniper patents related to firewall and network security technologies. The patents at issue were invented by Palo Alto Networks’ founders when they had been Juniper employees.

Irell scored a major victory when it successfully moved the district court to eliminate Palo Alto Network's defense of invalidity for each of its patents in the Delaware case under the federal common law doctrine of assignor estoppel. This rule prevents an inventor who assigns a patent to a buyer from later challenging its validity. After the court’s first assignor estoppel ruling, Palo Alto Networks took its invalidity defenses to the U.S. Patent and Trademark Office (PTO), filing five requests for inter partes reexamination, and, later, inter partes review (IPR) requests on two additional patents. Irell successfully beat back Palo Alto Network's PTO strategy, with two reexam requests being denied outright, two resulting in all claims being confirmed, and one that confirmed some existing claims, and added a number of new claims. The two IPRs were still pending at the time of settlement.

After Irell defeated Palo Alto Network's initial invalidity challenges, Palo Alto Networks filed an action in October 2013 in Santa Clara Superior Court attempting to block Juniper's assignor estoppel victory, claiming that it violated California's unfair competition law. Irell filed an anti-SLAPP motion in response, seeking to dismiss Palo Alto Networks’ entire case and an award of attorneys’ fees. The court granted Irell’s anti-SLAPP motion on January 15, dismissing Palo Alto Network’s case and awarding Juniper its attorneys’ fees. On the same day it filed the state court action, Palo Alto Networks also filed a patent lawsuit against Juniper in the Northern District of California on patents it had purchased from a third party, but this only caused Juniper to assert additional patents against Palo Alto Networks in that lawsuit. 

A seven-day trial in the District of Delaware was held earlier this year on whether Palo Alto infringed the first three of Juniper's asserted patents. When the jury could not reach a unanimous verdict on the one of the asserted patents, the judge declared a mistrial and ordered the parties to re-try the case. The Delaware court had yet to schedule the retrial on the first three patents or the trial on the remaining four patents at the time the parties settled. 

Under the terms of the settlement, Palo Alto Networks will make a one-time payment to Juniper Networks of $75 million in cash and $100 million in shares of common stock and warrants to purchase common stock. The companies also entered into a cross-licensing agreement and agreed not to sue each other for patent infringement for eight years.

The trial team was composed of Morgan Chu, Lisa Glasser, David McPhie, Jonathan Kagan and Talin Gordnia. Harry Mittleman, Benjamin Haber and Rebecca Carson also provided assistance.